How job creation became a crucial Ontario election issue

When industry in Southwestern Ontario has ramped up production and hired workers, the Ontario government has been quick to grab some credit this election year, dropping cheques on factory floors across the region.

But with Progressive Conservative leader Doug Ford saying he will now scrap the biggest of these programs — the $3.2-billion Jobs Prosperity Fund credited with supporting thousands of jobs at major automotive plants including Toyota in Woodstock and Cambridge, and Chrysler in Windsor — it begs the question: what will the three parties do for business, if elected?

“I don’t care about politics. I don’t care who wins and what campaign they run, as long as they have something to help create jobs,” said Tarique Al-Ansari, chief executive of a London financial technical business, Zomaron.

“I don’t care what incentives are there, as long as they are there and can deliver on creating jobs.”

Over the last three years, industry in the London region have received nearly $70 million from two provincial job funds, the Jobs Prosperity Fund and Southwestern Ontario Development Fund, creating more than 1,000 new jobs and retaining about 10,000 more over that period, according to figures released from the Ministry of Economic Development and Growth.

Ansari’s Zomaron has been one of them, getting $239,000 over five years from the Southwestern Ontario Economic Development Fund. He will use that money to grow his workforce by nearly 50 per cent, adding 38 to its 75 existing employees, he said.

“It has been very important to us. The government investment is creating jobs. It is really good to get this as a company for all the work we do.”

To get that money, he had to pledge investment of more than $2 million over the five-year period. He has to report back annually on new hires and investment. If he does not hit the targets, he won’t get the cash.

“To help companies create jobs, we need to have incentives in place. We have to keep business here and not go to Toronto or Silicon Valley. I think it helps.”

But the looming Ontario election has thrown that kind of support into question. Ford favours tax cuts over incentives, slamming the Jobs Prosperity Fund as “corporate welfare.” That fund has supported more than 40,000 jobs across Ontario in recent years, including 8,000 workers at Toyota, with about $150 million in investments, and more than 5,000 at Windsor’s Chrysler assembly plant, with $86 million in funding.

“In an era when NAFTA is under threat, the U.S. is announcing an investigation into auto imports as a national security threat, and there are broader concerns about productivity, removing an incentive for investment needs to be matched by an alternative replacement,” that will provide equal capital, said Brett House, vice-president and deputy chief economist, Scotiabank.

That fund also provided $7 million for Dr. Oetker’s $54.5-million investment this year, creating 103 jobs and retaining 115, at the London frozen-pizza maker.

The NDP pledges to maintain these programs, and in fact enhance the Jobs Prosperity Fund with more focus on research and development.

The Liberals are running largely on their record, crediting its incentives with helping grow the economy with nearly one million more employed in 2018 over 2003 – from 6.2 million to 7.2 million, dropping unemployment to its lowest rate since 2000, at 5.6 per cent.

“That fund is used a lot, and factors into employers’ long-term term investment planning. We would be concerned if it is canceled, it has made a significant difference in this province,” said Jordan Brennan, economist with Unifor, the national union representing many auto workers.

But Ontario business is competing with U.S. industry, which has been pledged a tax break from 35 to 21 per cent, and “tax reform” has to be on the agenda this Ontario election, said Dennis Darby, chief executive of the Canadian Manufacturers and Exporters.

He also sees the need for incentives, especially in the area of investing in equipment and technology and job training, to help business compete. Since 2013, foreign direct investment is down in Ontario two per cent, while it is up in the U.S. by 30 per cent.

“It means companies are choosing to put capital outside of Ontario and that is not good. It’s like we’re humming along, but driving a 10-year-old car, we are not investing, that is worrisome,” he said.

At the same time, plants here are running at 85 per cent capacity, the highest level in 17 years, he added.

“Incentives are great, they allow Canadian companies to compete. But we are also asking to modernize our overall tax rate.”

Manufacturing in Ontario, still accounts for about 30 per cent of the workforce, he said.

London has benefited largely from the Southwestern Ontario Economic Development Fund as it helps to grow and attract industry here, said Kapil Lakhotia, chief executive, London Economic Development Corp.

“From a competitiveness standpoint, Ontario is known as a higher cost location with rising wages, hydro and a host of other business costs. We have to make sure we are competitive on a global stage.

“Incentive programs are important in ensuring Ontario is on the radar for foreign investment,” said Lakhotia.

He hears from business that attracting and retaining talent is a big challenge and likes the job training programs supported by government. Many manufacturers in Southwestern Ontario also rebounded from the 2008 recession by investing in new technology and equipment, thanks largely to government support. That cannot be lost, he adds.

“It is just not a bag of money to attract a company. It is about training, talent, upgrading skills, investing in equipment.”

Concern over economic development funds is puzzling, considering Ontario is competing with regions in the U.S. for industry, and they are generous, added Lakhotia.

A 2012 study by the New York Times showed that Pennsylvania, a population of 12.8 million, pledged nearly $5-billion annually since 2007 in business incentives. Texas, with a population of 28 million, led the taxpayers’ parade with $19.1 billion in incentives, much higher than second-place Michigan, whichgot $6.6 billion.

By comparison, the Ontario government paid out $22.9 billion into dozens of business support programs between 2012 and 2017.

Alex Quaglia, owner of Sciencetech, a high-tech engineering firm that designs and builds equipment for agencies such as NASA, the European Space Agency and National Research Council, has received $161,400 from the Southwestern Ontario fund, and will hire about 15 employees to its workforce of 26, he said.

“I am really positive about this, I think it will help to increase our resources to develop more instrumentation for research and manufacturers,” said Quaglia.

Quaglia’s firm has built equipment used to calibrate instruments measuring the uniformity of radiation in space from the big bang to measure how the universe is evolving, he said. If he had to raise $150,000 in the private sector, he would have to show sales increases of $3 million, meaning growth could be delayed years, he added.

He will also prefers direct investment to a tax break, he adds.

“We will nearly double our jobs and the size of the facility, we will have more people working and that creates wealth for the community and the country. It is all about a better standard of living.”

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Ontario investment highlights

Southwestern Ontario Development Fund

Since 2013, has pledged about $153 million to create and retain about 39,000 jobs and leverage nearly $2 billion in total investments. The fund is currently supporting about 30 manufacturers in London and area, as grants are given over a five-year period. This includes:

Sciencetech Inc.: Ontario is investing $161,400 supporting an additional investment of $1.2 million from the company, creating 15 new jobs, retaining 26.

Sikorski Sausages Co.: Ontario is investing $329,720 supporting an additional investment of $3 million from the company, creating10 new jobs, retaining 56.

Start.ca: Ontario is investing $324,700 supporting an additional investment of $3 million from the company, creating 127 new jobs, retaining 117.

Zomaron Inc.: Ontario is investing $239,000, supporting an additional investment of $3.4 million from the company, creating 38 new jobs in addition to its current 75.

$2.6 million for five Windsor-area firms, creating 70 new jobs retaining more than 330, Dana Canada, Barry Callebaut Group in Chatham, Aarkel Tool and Die and Rulmeca Canada in Wallaceburg, and Waltron Trailers in Ridgetown.

Largely for the food and agricultural sector. From 2013 to 2018, the federal and provincial governments committed over $147 million for more than 6,500 projects in Ontario. Has supported more than 40 regional businesses in 2018, including:

11 in Middlesex, 11 in Essex, six in Chatham-Kent, eight in Oxford County, four in Huron and four in Elgin.

2018 Highlights, London: $250,000 for Black Fly, three different grants, $100,000 for McCormick Canada, $92,600 for London Brewing Co-Operative, $74,200 for Forked River Brewing Co-Op.

Where the big three Ontario parties stand on economic development incentives:

Progressive Conservatives:

Lower corporate income taxes from 11.5 per cent to 10.5 per cent.

Cancel the $3.2-billion Jobs Prosperity Fund.

Reduce red tape, bureaucracy.

Lower Hydro rates.

Regional economic development funds will remain.

NDP

Will enhance the Jobs and Prosperity Fund to support manufacturing research and development.

Will lower hydro rates by 30 per cent.

A 10-year, $1-billion fund to bring broadband service to rural and northern Ontario. Will invest $100 million in natural gas expansion to rural Ontario.

Existing economic development funds will remain.

Liberals:

Current economic development incentives

Southwestern Ontario Development Fund:

Jobs Prosperity Fund

GrowingForward 2

Eastern Ontario Development Fund.

Northern Ontario Fund.

Others: Several other programs offering funding and tax credits in areas of digital media, research and development, life sciences (biotechnology) and start-ups.

How Canada and the U.S. support business

Ontario: Pledged $110-million for Toyota’s investment of $1.4 billion in its Ontario plants in Woodstock, and Cambridge.

Alabama: A $1.6-billion investment by Toyota and Mazda in a Huntsville plant had the state – much smaller than Ontario with only about five million in population – pledge $350 million in support. A USA Today story stated the money was paid into job training, capital costs, such as building and equipment, assorted tax breaks and a training centre for workers built by the state.

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